GST/HST Notice on the new closely-related test may imply that special voting rights accorded by a subsidiary’s articles or in a USA may cause it to not be closely-related

The revised ETA closely-related person test requires that 90% or more of shareholder votes in respect of all corporate matters must be held and controlled by the tested person, with the exception inter alia of special voting matters provided by statute, or where a statute provides a special class vote. For an example of the first exception, CRA refers to the special voting right accorded by s. 183(3) of the CBCA to minority shareholders to approve an amalgamation. As an example of the second, it refers to the special class vote accorded by s. 176(1) of the CBCA to approve major amendments to the articles of incorporation.

The perceived need for these exceptions may imply that special voting rights accorded otherwise than by statute, e.g., in the articles or a unanimous shareholders’ agreement, could cause a shareholder to not be closely related for GST/HST purposes.

Neal Armstrong. Summary of GST/HST Notice No. 303 - Changes to the Closely-related Test under ETA, s. 128(1.1)(a)(i).